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Smith v. Hartman Walsh Painting Co.

United States District Court, D. North Dakota

August 3, 2018

Robert Charles Smith, Plaintiff,
v.
Hartman Walsh Painting Company, Basic Electric Power Cooperative, and Sargent & Lundy, LLC, Defendants. and Harman Walsh Painting Company, Defendant/Third-Party Plaintiff
v.
Duromar, Inc., Third-Party Defendant.

          ORDER REVERSING, IN PART, MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION AND GRANTING MOTION FOR RELIEF UNDER FED.R.CIV.P. 60(B)

          RALPH R. ERICKSON, CIRCUIT JUDGE

         On February 5, 2018, the court received a Report and Recommendation from Magistrate Judge Alice R. Senechal.[1] The report recommends that the plaintiff's Fed.R.Civ.P. 60(b) motion be denied because he failed to satisfy the rule's requirements. Plaintiff Robert Smith filed objections to the Report and Recommendation.[2]

         Smith has asserted, in part, a right to relief under Rule 60(b)(6), which provides that relief may be granted from an order for “any other reason that justifies relief.” The Eighth Circuit has noted that the rule is grounded in equity and exists “to prevent the judgment from becoming a vehicle of injustice.[3] An “important equitable consideration” is whether the litigants received a ruling on the merits of their claim.[4] Prior to deciding whether this court should exercise its equitable powers, the undersigned directed the defendants and third-party defendant to file a response to the merits of the plaintiff's arguments regarding the applicability of the circuity of obligation/indemnity provisions. The court has carefully considered the briefs filed by the parties[5] and now issues this order.

         The defendants/third-party defendants (collectively “defendants”) frame the issues as general lack of consent to the indemnity agreements, lack of intent of the parties, and whether there is ambiguity in the release agreement. The court sees the issue raised by Smith a bit differently. The release agreement provided:

for the sole consideration of Two-Thousand Dollars ($2, 000.00), . . . [plaintiff] does hereby release, and acquit and forever discharge Duromar, Inc., its heirs, representatives, . . . from any and all actions, claims, damages, costs, loss of services, expenses, and compensation on account of, or in any way growing out of, any and all personal injuries, whether physical or mental, resulting from an alleged accident that occurred on or about the 15th day of July, 2009, at or near Stanton, North Dakota.
* * *
It is further specifically agreed by the undersigned that by accepting this offer of settlement, that any and all claims save and except for the liabilities for workers' compensation benefits that are being settled pursuant to a separate agreement incorporated herein by reference, [6] for the injuries that the undersigned may have against Duromar, Inc. are settled by this release. It is understood that any potential claims the undersigned may have against any other tortfeasor are unaffected by the terms and agreements set forth herein.
* * *
It is further expressly understood and agreed that the undersigned reserves himself and preserves the balance of the whole claims, demands and causes of action against any and all persons and parties other than Duromar, Inc., and that he does not by this compromise settlement intend to release or discharge from liability any person or party or entity other than Duromar, Inc.[7]

         By the time Smith signed this release agreement, various indemnification agreements had been executed that Smith would have no reason to know about. Under these agreements, Basin and Sargent & Lundy were entitled to indemnification from Hartman Walsh; Hartman Walsh was entitled to indemnification from Duromar; and Duromar was entitled to indemnification from Smith. Thus, when Smith signed the release agreement he was responsible for satisfying any judgment he received from Basin, Sargent & Lundy, or Hartman Walsh. The statements in the release agreement- that any potential claims Smith might pursue against tortfeasors not named Duromar are “unaffected by the terms and agreements” and the agreement between Smith and Duromar does not “release or discharge from liability any person or party or entity other than Duromar”-misrepresented the reality of the situation. The indemnity agreements, for which Smith was not a party, made it a legal impossibility for Smith to recover from any other tortfeasor.

         It was not until Smith commenced this action for damages against Hartman Walsh, Basin Electric, and Sargent & Lundy for the incident occurring on July 15, 2009, that he discovered the legal impossibility. After commencing this action, Smith was met with motions to dismiss and for summary judgment. The court previously concluded that Smith's complaint was subject to dismissal because the circuity of obligation made him responsible for satisfying any judgment he obtained against the non-settling tortfeasors. It was after this finding that Smith brought a motion under Rule 60(b), asserting various legal reasons why the release agreement should not bar his claims against Basin, Sargent & Lundy, and Hartman Walsh.

         The magistrate judge previously found that North Dakota law is applicable in this diversity action.[8] The court has reviewed North Dakota law focusing on the “important equitable consideration” of whether the parties received a ruling on the merits of their claim. “A valid contract requires parties capable of contracting, consent, a lawful object, and sufficient consideration. The parties' consent must be free, mutual, and communicated to each other.”[9] If a party's free consent to a contract is obtained by fraud, the defrauded party may rescind the contract or affirm the contract and recover damages. Fraud under North Dakota law includes the following acts done with the intent to deceive another party or induce the other party to enter into the contract:

1. The suggestion as a fact of that which is not true by one who does not believe it to be true;
2.The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true though ...

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